Goldman Sachs (GS) Q2 Earnings Preview: SEC Settlment Positive, But Won't Add to Q2
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Shares of Goldman Sachs (NYSE: GS) are trading slightly higher today, ahead of the company's second quarter earnings release, expected out before the market opens tomorrow, July 20. Shares are 0.51% higher to $146.88.
Goldman is expected to report an EPS of $2.04 on revs of $8.99 billion. Last quarter, the company reported an EPS of $5.59 and revs of $12.78 billion. For Q209, Goldman posted an EPS of $5.71, ex-items, and revs of $13.76, both beating views.
Shares of the stock dropped through the quarter, as the Securities and Exchange Commission begin digging deeper into Goldman's activities over the last several years, including their involvement in the financial meltdown of 2008. Shares fell about 23% through the quarter, to land at $131.27 at the end of June. Though gaining some back lately on the SEC settlement, the stock is still 14.7% lower since the start of 2010.
Goldman is trading at a forward P/E of 8.8x, compared to 11.4x for J.P. Morgan (NYSE: JPM), 13.8x for BofA (NYSE: BAC), and 12.2x for Citigroup (NYSE: C).
Data from Bloomberg has 22 analysts with a Buy rating, 5 with a Hold, and none suggesting to sell. The analysts price target average is $191.21, with a high of $243, and a low of $165.
Analyst Ratings Through the Quarter
Following fraud charges in April, Oppenheimer was the first firm to downgrade GS, moving the firm from Outperform to Market Perform, with their $228 price target suspended. The firm is now back to Outperform following the settlement.
FBR Capital removed the shares from their Top Picks List, but reiterated their Outperform rating and $190 price target.
Wells Fargo maintained their Outperform rating an $205 - $215 valuation range on the shares following the SEC fraud charges. Recently, though, Wells cut their view on GS (as well as others in the sector). Wells sees sales about 14% lower than previously expected given: 1) lower trading revenue as a result of volatile market conditions, weak market trends, and lower principal investment revenue than previously modeled and 2) effects of the estimated $650MM UK bank tax ($1.10). Q2 EPS estimate lowered from $5.00 to $3.02, FY10 lowered from $21.93 to $19.72, vs. consensus of $19.18.
Meredith Whitney, at the end of April, said that all of the damage to GS has been done, and a support level in the $120s is what she was looking for. In early July, Meredith slashed her Q2 estimates on Goldman. She sees Goldman reporting Q2 EPS of $1.70, down from her previous estimate of $4.75.
Bank of America/Merrill Lynch downgraded the shares from Buy to Neutral, with a price target cut from $220 to $160.
Kicking off May, Citi reiterated their Buy rating on Goldman Sachs, while lowering their price target on the shares from $240 to $200. Citi says that risk is still there, but they still saw upside left in the shares.
Rochedale's Richard Bove cut his price target on Goldman from $200 to $182, commenting that his price cut wasn't related to the recent SEC investigation, but overall weakness in the business environment.
Atlantic Equities, in June, lowered their price target on the shares from $200 to $180, while maintaining their Overweight rating on the company.
Mid-June saw Barclays but their price target on GS from $195 to $175, keeping their Equal Weight rating on the shares. Notably, Barclays also lowered thei Q2 EPS estimate from $5.35 to $195.
Summary
EPS estimates for Goldman Sachs have been coming down all quarter as trading and other businesses were very weak this quarter. Pointing to how bad things could be for Goldman, rival JP Morgan (NYSE: JPM) recently reported a 35% sequential drop in FICC revenues.
The ax in the stock, Meredith Whitney, sees EPS of $1.70 - below the consensus.
The lowered estimates sets Goldman up for an easier "beat", but if it miss these heavily ratcheted down number than the fundamental picture at Goldman could be worse than expected possibly driven by the SEC fraud charges and negative media attention.
The good news is that Goldman recently settled with the SEC, paying a lower-than-expected $550 million.
Analysts were mostly positive on the settlement; upgrading the shares left and right: BofA/Merrill upgrades from Neutral to Buy, increasing their price target from $160 to $182; Oppenheimer upgrading from Perform to Outperform; Buckingham also upgraded the stock. Citi reiterated their Buy rating on the shares; Barclays maintained their Equalweight rating, with a $175 price target. No downgrades is a fairly bullish indicator, though the settlement won't directly affect the second quarter earnings report.
The Goldman Sachs Group, Inc. is expected to release their Q210 earnings on Tuesday, July 20, 2010, at approximately 7:00am EDT. Stay tuned to StreetInsider.com's Earnings section to see our analysis of the highly-anticipated quarterly results within seconds of their release.
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Goldman is expected to report an EPS of $2.04 on revs of $8.99 billion. Last quarter, the company reported an EPS of $5.59 and revs of $12.78 billion. For Q209, Goldman posted an EPS of $5.71, ex-items, and revs of $13.76, both beating views.
Shares of the stock dropped through the quarter, as the Securities and Exchange Commission begin digging deeper into Goldman's activities over the last several years, including their involvement in the financial meltdown of 2008. Shares fell about 23% through the quarter, to land at $131.27 at the end of June. Though gaining some back lately on the SEC settlement, the stock is still 14.7% lower since the start of 2010.
Goldman is trading at a forward P/E of 8.8x, compared to 11.4x for J.P. Morgan (NYSE: JPM), 13.8x for BofA (NYSE: BAC), and 12.2x for Citigroup (NYSE: C).
Data from Bloomberg has 22 analysts with a Buy rating, 5 with a Hold, and none suggesting to sell. The analysts price target average is $191.21, with a high of $243, and a low of $165.
Analyst Ratings Through the Quarter
Following fraud charges in April, Oppenheimer was the first firm to downgrade GS, moving the firm from Outperform to Market Perform, with their $228 price target suspended. The firm is now back to Outperform following the settlement.
FBR Capital removed the shares from their Top Picks List, but reiterated their Outperform rating and $190 price target.
Wells Fargo maintained their Outperform rating an $205 - $215 valuation range on the shares following the SEC fraud charges. Recently, though, Wells cut their view on GS (as well as others in the sector). Wells sees sales about 14% lower than previously expected given: 1) lower trading revenue as a result of volatile market conditions, weak market trends, and lower principal investment revenue than previously modeled and 2) effects of the estimated $650MM UK bank tax ($1.10). Q2 EPS estimate lowered from $5.00 to $3.02, FY10 lowered from $21.93 to $19.72, vs. consensus of $19.18.
Meredith Whitney, at the end of April, said that all of the damage to GS has been done, and a support level in the $120s is what she was looking for. In early July, Meredith slashed her Q2 estimates on Goldman. She sees Goldman reporting Q2 EPS of $1.70, down from her previous estimate of $4.75.
Bank of America/Merrill Lynch downgraded the shares from Buy to Neutral, with a price target cut from $220 to $160.
Kicking off May, Citi reiterated their Buy rating on Goldman Sachs, while lowering their price target on the shares from $240 to $200. Citi says that risk is still there, but they still saw upside left in the shares.
Rochedale's Richard Bove cut his price target on Goldman from $200 to $182, commenting that his price cut wasn't related to the recent SEC investigation, but overall weakness in the business environment.
Atlantic Equities, in June, lowered their price target on the shares from $200 to $180, while maintaining their Overweight rating on the company.
Mid-June saw Barclays but their price target on GS from $195 to $175, keeping their Equal Weight rating on the shares. Notably, Barclays also lowered thei Q2 EPS estimate from $5.35 to $195.
Summary
EPS estimates for Goldman Sachs have been coming down all quarter as trading and other businesses were very weak this quarter. Pointing to how bad things could be for Goldman, rival JP Morgan (NYSE: JPM) recently reported a 35% sequential drop in FICC revenues.
The ax in the stock, Meredith Whitney, sees EPS of $1.70 - below the consensus.
The lowered estimates sets Goldman up for an easier "beat", but if it miss these heavily ratcheted down number than the fundamental picture at Goldman could be worse than expected possibly driven by the SEC fraud charges and negative media attention.
The good news is that Goldman recently settled with the SEC, paying a lower-than-expected $550 million.
Analysts were mostly positive on the settlement; upgrading the shares left and right: BofA/Merrill upgrades from Neutral to Buy, increasing their price target from $160 to $182; Oppenheimer upgrading from Perform to Outperform; Buckingham also upgraded the stock. Citi reiterated their Buy rating on the shares; Barclays maintained their Equalweight rating, with a $175 price target. No downgrades is a fairly bullish indicator, though the settlement won't directly affect the second quarter earnings report.
The Goldman Sachs Group, Inc. is expected to release their Q210 earnings on Tuesday, July 20, 2010, at approximately 7:00am EDT. Stay tuned to StreetInsider.com's Earnings section to see our analysis of the highly-anticipated quarterly results within seconds of their release.
Market Moving News and Intelligence - Free Sign-Up
http://www.streetinsider.com/premium_content.php
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